Unilever’s Paul Polman: Consumer Economy Growth Is Long-Term

By Simon Zekaria

Bloomberg

Paul Polman

In these troubled times where the news agenda is dominated by acute concerns over short-term economic volatility as the tentacles of the Western World’s sovereign debt crisis sweep across the globe, it is axiomatic that longer-term, bigger-picture perspectives can get pushed to the wayside.

This week, Unilever, the world’s second-largest maker of branded household products after U.S.-based Procter & Gamble Co., hosted a televised debate on sustainability to tackle a fundamental question: how can businesses help citizens across the globe bridge challenges posed by environmental, economic, and social pressures to become responsible consumers?

In a one-on-one interview on the sidelines, the FTSE 100 giant’s CEO Paul Polman, one of the globe’s most powerful executives, admitted it is very easy for this enormous topic to get well-hidden as governments prioritize immediate fixes to their public finances.

It is a priority that investors have fully taken on board. Wide stock declines have continued erratically in recent days and weeks, driven lower by frayed nerves over Europe, as well as fresh worries over U.S. debt negotiations.

But Mr. Polman said that we need to think again. Tackling debt reduction and fiscal stability should not come at the expense of longer-term solutions for the global consumer economy.

“Don’t see it as a trade off, that one cannot be achieved without the other.”

Take Europe, Mr Polman said: “You have to come to an agreement on how to re-ignite growth without further worsening the deficit. Europe has some challenges that need to be fixed. But the solutions don’t have to come at the expense of sustainable growth.”

It’s a subject easy to get cynical about. Global businesses of this scale are there to market and sell as many products as they can to as many people as they can. Their raison d’etre is to drive commercial success and boost profitability to both placate shareholders and seduce investors.

All well and good, but what about their other credos and responsibilities?

Mr. Polman said branded products, marketed and sold in a world where resources are stretched to breaking point, go beyond a boost to the top line. For him, they are key to educating and improving the lives of millions across the globe. Soaps are a conduit to hygiene, toothpaste and laundry are linked to water consumption, shampoo results in cleanliness, which is connected to well-being.

The company produces Ben & Jerry’s ice cream, Knorr soup and Lipton tea and household products such as Dove, Lynx and Cif. It also makes Lifebuoy, a soap launched in the U.K. at the end of the 19th century, now the market leading brand in India and the driver of hygiene education programs in countries including India, Bangladesh, Pakistan and Sri Lanka.

Unilever’s trading is driving a surge in demand for products in emerging economies, which now generate over half of its business. Mr. Polman also knows full well that these regions are at the heart of global concerns.

“Many of the emerging markets are where a lot of the pressures will be, in terms of water, climate change and food security. These pressures are in parts of the world where two billion more people are coming.”

But for Polman, it goes further than that. Contributing to global solutions is also sound business sense. He has a stark warning: businesses can no longer afford to ignore the sweeping changes driven by consumer ideals for more responsible lifestyles.

“In order to get people energized, which you cannot do by doubling the business, improving profit or becoming the best performing [company], you have to go back to the roots. You ask a question: ‘How can I contribute to society and the environment, instead of taking?,” Mr. Polman told me.

“It requires a different way of operating. I firmly believe that will be the only model that ultimately consumers will give permission [for businesses] to operate in.”

Again, easy to dismiss as ‘greenwash’. But, look deeper and one realizes it is becoming ever harder to do so.

Companies with a global footprint, including products and retail giants, are now more accountable than ever to the consumer. Social media technologies like Facebook and Twitter, mediums for opinion, comment and debate, can make or break reputations of brands and the companies who make them. They exist now in a court of public opinion.

It is no longer enough just to talk a good game.

Unilever aims to source 100% of its agricultural raw materials sustainably by 2020, up from 10% currently. For palm oil, the time frame is by 2015. It also targets halving the environmental footprint of its products, including gas, water and waste, by 2020.

They are ambitious targets, made even more put into relief by the ongoing volatility of global commodity prices that cause havoc on the financial markets. “Supply is very tight” and the “smallest disruptions in supply” can have wide-reaching effects, Mr. Polman said.

We all live in a consumerist world, for good or ill, based on wants and desires. Branded companies, perhaps even more than governments, are also the most influential driving force for change in consumption trends, whether people like it or not. The consumption of branded products is also, most importantly, the engine for economic growth.

In effect, for mature markets at least, the consumption of products has put us in this position. But the consumption of products can also get us out of it.

Mr. Polman knows full well that an appreciation of this complex dynamic is key to the long-term health of the global consumer economy.

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